Understanding Mean Reversion in Crypto Trading

Mean reversion is a solid approach for traders looking to capitalize on price swings. The core idea? Assets tend to bounce back to their average levels after extreme moves.

Here's how it works in practice:

**The Setup**: When an asset dips significantly below its moving average or oversold levels, it often represents a buy opportunity. Conversely, when it rallies well above the average, you're looking at potential exit or short positions.

**Why It Matters**: In volatile crypto markets, prices overshoot constantly. Mean reversion catches these reversals before momentum traders pile in the other direction.

**Key Considerations**: Success depends on identifying true support/resistance zones, managing position sizing, and avoiding mean reversion traps during strong trending moves. Always pair this with risk management—stop losses are non-negotiable.

This strategy works best in range-bound markets but requires caution during breakouts or sustained bull/bear runs.